Online trading is something that many have tried and nearly as many have failed at; yet it has become increasingly popular in recent years, particularly during the COVID-19 pandemic, as more and more people turned to online trading out of desperation. But as with everything in life, popularity is not a sure sign of a good idea. The question we need to be asking is, “can you actually make money from trading while chilling on the couch?”.
While there are certainly some advantages to online trading and doing it from the comfort of your own home, there is also a great deal of risk attached to this practice. So, let’s start by looking at the good side of retail trading. Let’s assume you are quitting your job and doing it full-time. Well, you can then be sitting in your dirty pajamas while buying and selling securities all day long, or whenever you feel like it. This means that you don’t have to worry about fighting through traffic to get to the office on time for work, looking good doing so, and spending 8+ hours a day slaving away to make someone else rich. It sounds like a grand old time, but is it really all it’s cracked up to be?
Well, most people who go this route quickly fall into the trap of getting lazy and distracted. Very soon they realize that most of their day is spent scrolling through TikTok and eating a lifetime's worth of potato chips in a week. While it is great to be able to trade from home it takes a lot of time, dedication, and a strict routine to be able to make a success of it.
Sure, this might be the case for people who decide to do this full-time, but what about the armchair trader who wants to keep doing what they are doing, while making a few coins on the side? The same thing applies; routine, a proven strategy, and dedication galore.
Today the preposition of trading from home is more attractive and easier to accomplish than ever before. Many online brokers offer lower fees and commissions than traditional brokers, which can make a significant difference in your profits or losses. Online trading platforms often provide a wide range of tools and resources to help you make informed decisions, such as real-time market data, news, and analytical tools that can provide as much market insight as you could ever hope for. These days you can spend 24/7 online and find markets to trade all day long from all over the world, so you are not even bound by time or space anymore.
However, it's important to keep in mind that online trading carries some massive inherent risks. One of the biggest risks is the potential for financial loss. According to data released by the Securities and Exchange Commission back in 2011, approximately 70% of FX retail investors lose money every quarter, while on average 100% of a retail customer‟s investment is lost in less than 12 months. While this data might be a few years out of date, some experts believe that these figures have not changed much over time and might even have gotten a bit worse.
In addition to financial risks, there is also the risk of scams and fraudulent activity. It's important to be cautious when choosing an online broker or trading platform, as there are many unscrupulous individuals and companies looking to take advantage of inexperienced investors. To find a reliable and trustworthy broker, you should do your research and look for reviews and recommendations from trusted sites like investfox to help you choose a broker that will keep your best interests at heart.
While all this might seem to paint a bleak picture of the trading markets as a whole, we believe that it is better for traders to head into this industry knowing what they are up against.
If you have read all this and have not run for the hills, then there are several strategies that retail traders can employ in order to avoid losses and potentially up their ability to make profits.
How to minimize risk?
Let's look at how you can mitigate some of the risks.
- Risk management: Proper risk management involves setting stop-loss orders at strategic points to limit potential losses. It also involves not risking more capital than you can afford to lose and not letting emotions guide your trading decisions
- Diversification: Diversifying your portfolio can help to spread risk across different asset classes and reduce the impact of any one investment on your overall portfolio
- Technical analysis: By using technical analysis, traders can identify patterns and trends in the market that may indicate when to buy or sell a particular security. It is often recommended that you should always trade in the direction of the trend rather than making risky bets in the opposite direction
- Fundamental analysis: Fundamental analysis involves looking at the underlying economic and financial factors that may affect the price of a security. By understanding the fundamentals of a company, the happenings in a certain region, and having an up-to-date idea of what is happening around the world, traders can make more informed decisions about when and what to buy or sell
- Research: It is important to thoroughly research any investment before making a decision. This includes understanding the company's financials, management, industry, and competition. The same goes for crypto or FX, you need to dig deep to get the clearest picture. While spending time on technical and fundamental analysis is great, also take some time to see what other traders have to say. There are a lot of top-tier investors and traders that have social media accounts where they share their thoughts and opinions. It is also a good idea to join some communities that focus on trading and chat with other traders to see what the general market sentiment is before jumping into a trade
- Patience: As the old saying goes, “patience makes perfect”. You should be ready and willing to wait for the right opportunity to present itself, rather than trying to force trades. Spend time on a demo account and test out your theories to make sure you have a winning strategy, only then should you move on to real trading
By following these strategies, retail traders can increase their chances of success and minimize potential losses in the stock, Forex, crypto, or whatever markets they plan to trade
To get started with online trading, you will need to follow a few steps
The first thing that you need to do in order to get started in the trading game is to find a broker: This might seem simple enough, head to Google, search for online brokers, and click on the first result that pops up, right? Not so fast skippy. It is of the utmost importance to choose a reliable and trustworthy broker. Look for a broker that is regulated by a reputable organization, such as the Securities and Exchange Commission (SEC) or the Financial Industry Regulatory Authority (FINRA), because without good regulations governing the conduct of the broker you can very easily get hoodwinked and lose all your money.
One of the easiest ways to find good accredited brokers is to use something like investfox’s broker filter system. After selecting either stock, Forex, or crypto brokers, you will be able to filter through a list of reviewed brokers based on your personal needs.
As an example, let’s say you are looking for a broker that holds a license from South Africa and offers MetaTrader 5, with Forex and the ability to fund your account using a Mastercard. Well, as you select each parameter the list will update automatically and you’ll be able to find a broker that fits your needs.
Once you have read up on a few brokers and found a reliable one it is time to create an account. This usually involves filling out an online application and providing some personal and financial information. It is a pretty simple process that resembles any other sign-up you might do online.
So, your account has been opened, great, but it’s not quite ready for use. Now you will need to verify your account. Most brokers will require you to verify your identity and address before allowing you to trade. This is done in accordance with the KYC (Know Your Customer) rule which is oftentimes required by regulators. This may involve providing documentation such as a government-issued ID and a utility bill being uploaded to get you going.
Finally, it is time to put your money into your new account. Once your account is set up and verified, you will need to fund it before you can start trading. This can typically be done through a bank transfer or by using a credit or debit card, some brokers might accept 3rd party payment options such as PayPal, and others will even allow you to do it via a crypto wallet; it all depends on the broker.
Testing out strategies on a demo account should be the next thing on your list. Many brokers offer demo accounts that allow you to practice trading without risking any real money. This can be a good way to test out different strategies and see how they work before putting any real cash on the line. As mentioned in the section about risk management, you need to make sure that you have a working strategy and that you have done plenty of research before putting any money into your trades. Don’t be scared or shy to say that you are using a demo account, even the best traders in the world spend many hours on trading accounts before ever risking a penny in the markets.
Once you feel comfortable with your trading strategy and feel sure that it works, then you can start trading with real money. However, it's important to keep in mind that the stock market can be volatile, and you should always be prepared for the possibility of losses. Even if you have a winning strategy, it won’t work all the time. Therefore you have to keep to your plan and only trade based on your strategy and never based on emotions. There is a saying in trading that you should always plan your trade and trade your plan, write it down somewhere and always follow this rule no matter what.
Final thoughts
Becoming a proficient online trader is hard work and it can take a lot of time and effort for you to become successful at it. While most people might end up quitting when the first losses appear, you can only succeed if you persevere. While online trading can be a good way to make money from home, it's important to approach it with caution and do your research before jumping into any trade. Make sure you have a reliable broker, you have tested your strategies, and that you always stick to trading based on your plan; and who knows, maybe one day you could be the next George Soros.
